NEW DELHI: Did you know that you can save tax under Section 80C of the Income Tax Act by investing in different insurance products? While investing in a variety of products is vital for a well-balanced investment portfolio, investing in products that promise the highest possible returns is also essential.
Insurance products, which help secure your future, also help save tax. But saving taxes shouldn’t be the primary goal of having an insurance policy.
It would be helpful to consider tax saving options that can help make wise and informed decisions:
Term insurance plans
Term life insurance is a well-known product that you should include in your financial planning portfolio. The premiums you pay for a term life insurance policy to financially secure the future of your dependents are eligible for tax exemption under section 80C of the Income Tax Act 1961. Income.
The maximum amount you can save by paying the premium under this section is ₹1.5 million. “You can even reduce your taxable income by purchasing term life insurance for your parents, spouse and children,” said Sajja Praveen Chowdary, term life insurance manager, Policybazaar.com.
Chowdary said: “If you want to take advantage of Section 80C tax relief by investing in term life insurance, you should be aware that the premium for policies purchased before April 1, 2012 cannot exceed 20% of the sum assured. In addition, the premium for policies taken out after April 1, 2012 may not exceed 10% of the sum insured. »
The payment received by the agent on the death of the policyholder is entirely tax-free.
Unit Linked Insurance Plan (ULIP)
You can easily save tax by investing in ULIPs (up to 2.5 lakhs) under Sections 80C and 10 (10D) of the Income Tax Act. In addition, on exit from the contract (allowed after five years) or at maturity, the value of the fund is completely tax-free.
Chowdary said: “You may also want to consider investing in children’s plans to maximize your Section 80C savings because children’s plans, in addition to helping you build a sufficient corpus for the safe future of your child, also promise maximum returns.”
In addition to providing family protection coverage, an endowment policy is a life insurance policy that also helps you save regularly over a specific period of time to get a lump sum when the policy matures if you survive the death. insurance period.
The premium you pay up to ₹1.5 lakh is tax deductible and helps reduce the tax burden by reducing your taxable income. You can claim such a deduction under Section 80C of the Income Tax Act.
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